US non-farm payrolls rose by only 22,000 in August, falling short of the expected increase of 75,000. In Canada, employment dropped by 65,500 instead of the anticipated 10,000 rise. As a result, the Federal Reserve is considering cutting rates by 25 basis points. There’s a 90% likelihood of a rate cut at each remaining meeting this year. Meanwhile, Saudi Arabia suggests that OPEC+ should quicken the next oil production increase.

Market Movements

Market reactions were significant; gold surged by $41, reaching a new high of $3,586. WTI crude oil dropped by $1.49 to $61.99, and US 10-year yields fell by 10.2 basis points to 4.07%. The S&P 500 lost 20 points, ending at 6,481, with the Swiss franc leading the way while the Canadian dollar lagged. Both US and Canadian currencies weakened slightly, with the Canadian dollar performing the worst. The market predicts 47 basis points of easing in Canada and 131 basis points in the US over the next year. Gold gained from expectations of rate cuts, but the stock market had mixed reactions. Initial excitement about rate cuts shifted to concerns about a potential recession. Still, some late bids pushed US indexes higher by the end of the week. With the disappointing job reports from both nations, there’s a clear sign for central banks to act. The market now sees a 90% chance of a Federal Reserve rate cut at the September meeting, making lower interest rates very likely. Traders should consider derivatives that profit from falling yields, like buying call options on Treasury bond ETFs such as TLT or purchasing SOFR futures.

Rising Volatility

The uncertainty in the stock market, which rallied on hopes of rate cuts but then fell due to recession fears, indicates rising volatility. The CBOE Volatility Index (VIX) has climbed from its summer low of around 13 to just over 19, reflecting increasing market anxiety. This environment is suitable for long volatility strategies, like buying VIX call options or using straddles on the S&P 500 to benefit from significant market moves. The Canadian dollar is under pressure due to weak domestic job data and plummeting crude oil prices. We see the loonie as the most at-risk currency among the G10 and anticipate further declines. Traders should think about purchasing put options on the Canadian dollar or taking short positions against safer currencies like the Swiss franc. Gold’s rise to over $3,500 is driven by falling real yields and a move toward safer assets. This strong momentum is fueled by upcoming rate cuts and economic concerns, presenting a great opportunity for profit. We believe that buying call options on gold futures (GC) or related ETFs is the easiest way to benefit from this trend. Crude oil is sending warning signs, as worries about a recession causing reduced demand are now more prominent than supply issues. This negative sentiment is heightened by reports suggesting that OPEC+ may increase production, leading to a bearish outlook for coming weeks. We recommend considering put options on WTI futures to hedge against or profit from further declines in energy prices. This economic slowdown isn’t surprising. Key indicators, like the ISM Manufacturing PMI, have been below the contraction level of 50 for several months in 2025. With the latest Core PCE inflation rate from July 2025 at a manageable 2.7%, the Fed has a clear reason to cut rates. However, it’s important to remember that early rate cuts in past cycles, like in 2007, didn’t prevent economic downturns— a crucial lesson for today. Create your live VT Markets account and start trading now.

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